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CMA Intermediate · Corporate Accounting and Auditing · Events after the Reporting Period (Ind AS 10)

After 31 March 2027 but before approval of the financial statements, Meera Engineering Ltd's operating results and financial position deteriorated sharply, though management has not decided to liquidate. According to Ind AS 10, what is the implication?

Deterioration after the reporting period may indicate that management must consider whether the going concern assumption is still appropriate. It does not automatically invalidate the assumption. If the assumption is found inappropriate, the whole basis of accounting changes rather than individual amounts being adjusted.

  1. ASuch deterioration is always an adjusting event requiring restatement of assets
  2. BDeterioration may indicate a need to consider whether the going concern assumption is still appropriateCorrect
  3. CNo consideration is needed, as events after the reporting period never affect going concern
  4. DThe going concern assumption is automatically abandoned

Explanation

Deterioration in results and financial position after the reporting period may indicate a need to consider whether going concern remains appropriate. It does not automatically end the assumption, and it is not simply an adjusting event. If the assumption becomes inappropriate, a fundamental change in the basis of accounting is required.

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